CBI Alleges IL&FS Energy Diverted Canara Bank Loans, Books Company and Five Directors in Rs 212 Crore Case

The Central Bureau of Investigation has registered a bank fraud case against IL&FS Energy Development Company Ltd (IEDCL) and five of its managing directors and directors. The agency alleges the company caused a wrongful loss of Rs 212.34 crore to Canara Bank.

The FIR was registered on Oct. 21 on a complaint from Canara Bank's Circle Office in Bandra (East), Mumbai. CBI officials disclosed the case on Friday, Oct. 23, and Saturday, Oct. 24.

Who is named

The FIR names the Mumbai-based company and five people: Sunil Wadhwa, Anoop Seth, Hari Sankaran, Ramesh Chandra Bawa and Arun Kumar Saha. It also names unknown public servants and unknown private individuals.

The charges are criminal conspiracy and cheating, plus offences under the Prevention of Corruption Act. IEDCL is a subsidiary of the Infrastructure Leasing & Financial Services (IL&FS) group, whose collapse in 2018 became a major financial scandal in India.

None of this has been proven. An FIR is the formal start of an investigation, not a finding of guilt. The CBI's account is allegation, and the named individuals are presumed innocent.

The two loans

The case centers on two credit facilities from the erstwhile Syndicate Bank, which later merged into Canara Bank.

The first was a short-term loan of Rs 100 crore, sanctioned for 12 months under a Multiple Banking Arrangement through the bank's Large Corporate Branch in Mumbai. According to the FIR, it was meant to fund solar park, wind energy and solar energy projects carried out through the company's project entities.

The second was a $50 million term loan from Syndicate Bank's London branch. It was meant for onward lending to the borrower's existing and new special purpose vehicles in infrastructure. It could also be used for other purposes permitted under the Reserve Bank of India's External Commercial Borrowings guidelines.

What the CBI alleges happened to the money

The agency's statement says the company did not use the funds for the purposes they were sanctioned for. It alleges the money was siphoned off through associate companies.

The FIR leans heavily on a forensic audit carried out by Canara Bank. According to the FIR, the audit found the borrowed funds were deployed for purchases and activities other than the sanctioned ones. It says the funds moved through group and associate entities, with inadequate supporting documentation and questionable accounting treatment.

The FIR also alleges that the company misrepresented its financials to conceal its worst financial position. That is a separate allegation from the diversion of funds, and it is also unproven.

The CBI puts the alleged wrongful loss to the bank at Rs 212.34 crore.

Searches and seizures

After registering the case, CBI teams searched premises linked to the company's managing directors and directors in Mumbai, Delhi, Noida and other locations. The agency said it recovered and seized:

• bank documents and deposit slips
• mutual fund portfolio documents
• bank account and property details of the directors
• company ledgers relevant to the investigation

The seizures show investigators are following the money trail beyond the original loan accounts. Mutual fund records and personal property details suggest they want to see where the proceeds may have ended up.

What comes next

The CBI said its investigation is continuing. It aims to establish the full extent of the conspiracy, identify the role of everyone involved, and trace the end use of the loan funds.

The unidentified public servants in the FIR are the open question. The CBI has not said who they are or what role it believes they played. Their inclusion, along with the Prevention of Corruption Act charges, means investigators are looking at whether anyone on the official side facilitated the loans or the alleged diversion.

The named executives have not been tried, and the forensic audit findings have not been tested in court. Whether the CBI can document the path from sanctioned loans to associate entities, and who inside or outside the bank enabled it, will determine whether this case goes beyond the FIR stage.